Provinces must be part of national climate change framework to access per capita funding, McKenna says

To access the federal government's low-carbon economy fund, every province is required to implement a minimum $10 per tonne price on carbon by the spring of 2018, or Ottawa will do it for them. Two provinces have yet to sign on. (Dan Riedlhuber/Reuters)

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Manitoba and Saskatchewan have been given until the end of December to sign on to the federal government's national climate change agreement to avoid losing out on millions of dollars to help cut emissions.

Environment Minister Catherine McKenna unveiled details Thursday of the Trudeau government's promised $2-billion Low Carbon Economy Fund, to be spent in two streams over the next five years.

The first is a $600-million Low Carbon Economy Challenge for industry and public sector projects, to be launched this fall and doled out on a merit-based, project-by-project basis.

Municipalities, provinces, territories, indigenous governments and organizations, businesses and not-for-profit organizations can all apply for funds, which will be prioritized for projects that provide the biggest emissions reductions for the lowest cost.

The second is a $1.4-billion Low Carbon Economy Leadership Fund per capita fund for provinces and territories that have signed on to the Pan Canadian Framework on Clean Growth and Climate Change.

Environment Minister Catherine McKenna released details Thursday of the Liberal government's low carbon economy fund. The $2 billion is a mix of private sector and provincial per capital funding that's meant to be spent over the next five years. (Fred Chartrand/Canadian Press)

Each eligible province will receive a base of $30 million plus a per-capita share of up to $1 billion.

Manitoba and Saskatchewan, the only two provinces that have not signed on, have been told they will only get their share of the funding if they sign up by the end of the year.

If not, their shares — about $66 million for Manitoba and $62 million for Saskatchewan — will be transferred to the challenge fund. Those provinces can apply for funding under the challenge fund regardless of whether they join the framework.

Government unveiled details about the long-anticipated $2-billion Low Carbon Economy Fund, but two provinces could miss out8:34

McKenna said "it's only fair" that the provinces that stepped up to help Canada meet its international commitments to reduce emissions get to share in the fund.

"We're certainly working very hard with Saskatchewan and Manitoba and are very hopeful that they'll sign up to the pan-Canadian plan on climate change," McKenna said.

"But let's be clear, all provinces and territories agreed in the Vancouver declaration with the prime minister that we needed to have a credible plan with serious actions that would meet our international obligations.

"The pan-Canadian framework on climate change represents that plan and we will be supporting provinces and territories that have signed up for the plan."

In a statement Thursday night, Sustainable Development Minister, Cathy Cox said "Manitoba is committed to a made-in-Manitoba climate and green plan," but only after gathering input from Manitobans.

Provinces needed more time

This fund was first created in the 2016 federal budget to help provinces fund initiatives to significantly cut greenhouse gases, part of Canada's race to meet its targets under the Paris climate change accord.

Canada must cut almost 200 million tonnes of emissions by 2030 to meet its target of reducing greenhouse gases to 30 per cent below 2005 levels. That's the equivalent of taking more than twice as many cars off Canada's roads as are even in the country.

The fund was initially to be a two-year program, with $2 billion equally divided between 2017-18 and 2018-19, until it became clear early in the negotiations that the provinces and territories needed more time to find the best uses for the money.

The money was reprofiled over five years in this year's budget, starting with $250 million in 2017-18. There will be $500 million available in each of the next three years and the final $250 million in 2021-22.

The federal government wants the funds spent on projects that significantly reduce emissions, prioritizing those that reduce the most emissions most cheaply. Initiatives must also be in addition to existing projects or those that are already planned.

McKenna said her department is negotiating with the provinces in the framework this summer to work out agreements on how the funds can be spent.

Thus far, the promise of a piece of the $2-billion pie has not been enough to lure either Saskatchewan or Manitoba onside.

'Punitive, petty and heavy-handed': Wall

Saskatchewan Premier Brad Wall is adamant he will never sign the framework as long as it requires him to introduce a price on carbon. Wall has threatened to sue Ottawa if it tries to impose a carbon tax on the province.

On Thursday, Wall took to Facebook to reinforce that message, and called the move "nothing short of extortion by the federal government."

"Withholding funds from provinces that don't go along with the federal government's policies represents a new low in Canadian federalism," he wrote in the post.

"If this fund, which Saskatchewan taxpayers have helped create, is really about reducing carbon emissions, how does withholding those funds for green initiatives in Saskatchewan help that objective?"

Wall also argued his province has invested more per capita in fighting climate change by backing carbon capture and storage initiatives.

"Justin Trudeau promised a new era of cooperative federalism. This is new, all right. It is, by an order of magnitude, more punitive, petty and heavy-handed than anything Stephen Harper ever did," Wall wrote.

As part of the framework, Ottawa requires every province to implement a minimum $10 per tonne price on carbon by the spring of 2018, or Ottawa will do it for them. The price has to rise by $10 per tonne per year until it hits $50 per tonne by 2022.

Ottawa pledges any revenue raised by a carbon tax directly will stay within the province it came from, although only those with their own carbon price program will get to decide how to spend it.

The federal government will decide how to allocate the money raised by carbon taxes it imposes, and is looking at giving at least some of it back in direct grants to individual families and small businesses.

Manitoba chose not to sign the framework in an attempt to leverage more money for health care. It is less opposed to a price on carbon, but sources tell The Canadian Press the province may prefer a federally imposed carbon tax to force Ottawa to wear the political fallout.